Seigniorage

( Originally Published Early 1900's )

This term, as used in the United States, means the profit arising from the coinage of bullion. The government does not purchase gold bullion, but coins it on private account. There is no profit from the coinage of gold bullion, the face value of gold coins being the same as their bullion value ; but at the present ratio of 16 to 1, the face value of the silver dollar is greater than its bullion value ; there-fore, when silver bullion is purchased and ' coined into dollars there is a profit arising from such coinage, the amount of which depends upon the price paid for the bullion. For example, there are 371 1-4 grains of pure silver in a dollar, and there are 480 grains of pure silver in a fine ounce. The coinage value of a fine ounce is therefore $1.2929 —. If the fine ounce can be purchased for seventy cents, the profit of its coinage (the seigniorage) is $0.5929 —, and the profit on the 371 1-4 grains of pure silver in the single dollar is $0.4586 —, which is the difference between the actual cost of the bullion in the dollar and the nominal value of the coin.